The Cheapest Generation? But Not By Choice

October 24, 2012

by Chris Holt, Marketing

I’m a Millennial. Born in 1984, I’ve grown up with the Internet, saw
Facebook change how we interact with each other, and entered the
business world right when ZipCar, Netflix, and smart phones were
transforming industry. I also left college in a time when student debt
was at an all time high, a recession hit, and unemployment tripled. All
of these factors have contributed to my financial behavior, whether
consciously or not.

There
have been several articles published recently discussing the role of
millennials in shaping the next economy. We’ve been alternatively called
the ambassadors of the Rentership Society and the embodiment of the
Cheapest Generation. Economists look to us as both enterprising pioneers
of a new economic model and the harbingers of destruction to old
business, dooming the economy and slowing our recovery. If the previous
generation’s music was too loud, ours is too shareable.

The Atlantic’s recent article, entitled “The Cheapest Generation” by Derek Thompson and Jordan Weissmann, has perhaps the most erudite post of the controversy so far, arguing that Millennials won’t be buying cars and houses like the previous generation. They argue, rightly, that renting or sharing cars and homes– the status symbols of a former generation– comes natural to us not only because it’s more economical, but more convenient.

For a generation that grew up transitioning from CDs to Napster to Spotify and Pandora, subscribing to services is second nature. We adapt, we dig convenience, and we’re well, short on cash.

One
of the biggest flaws of The Atlantic’s piece is its lack of discussion about why we’re so money conscious. The recession hit young workers disproportionately and that means we wouldn’t be buying houses or cars soon anyway, but if we did, we’d go for cheaper, more efficient alternatives. As a commenter pointed out in the Atlantic’s forums, ““You mean the generation that paid three times as much for college to enter a job market with triple the unemployment isn’t interested in purchasing the assets of the generation who just blew an enormous housing
bubble…? Curious.” Sarcasm aside, the status symbols of the previous
generation may not be attainable for us on the short term, nor desirable. To measure us against our predecessors, and to protect our behavior accordingly, is a foolhardy task.

So yes, for all of the fancy marketing that automakers seek out, we millennials will never mimic the buying patterns of our parents and we
won’t be leading the country out of a recession due to our collective purchasing of houses.

The piece’s authors pose an interesting question, “What if Millennials’ aversion to car-buying isn’t a temporary side effect of the recession,
but part of a permanent generational shift in tastes and spending habits? It’s a question that applies not only to cars, but to several other traditional categories of big spending—most notably, housing. And its answer has large implications for the future shape of the economy—and for the speed of recovery.”

The
problem I have with the Atlantic’s piece is that by posing such a question, they seem uncertain of its answer. The fact of the matter is, this move from an ownership economy to a rentership, shared, subscription economy is inevitable, cross-industry, and already happening now.

Music, cars, homes, consumer goods, even manufacturing are now transitioning to a subscription-based economy. Businesses that are suffering aren’t adapting to consumer demand– a demand that the relationship between the customer and the business is a long-term, highly customizable bond. Expecting the old single-purchase model to endure is like expecting cassettes to replace iPhones.

What
“The Cheapest Generation” is lacking is a discussion of what this new
landscape will look like. The status symbols, metrics, and industries
that used to be the backbone of our economy simply won’t be for
Millennials. We’re more likely to spend money on a high-end phone than a
car, we’re increasingly likely to use group discount sites,
subscribable e-commerce sites for our groceries, clothing, and luxury
items. We demand customization, but a savvy business can ensure our
relationship for years to come. The sectors that will benefit most
immediately will be the technology and telecom industries, but as
manufacturing catch up, they too will benefit for a more efficient,
customer-driven approach.